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IPO loses lure in the face of plenty: ​MakeMyTrip

Rajesh Magow, CEO & co-founder said he wouldn't jump to specifics of when the company would likely break even

Jul 2, 2019 by Moulishree Srivastava
IPO loses lure in the face of plenty: ​MakeMyTrip

MakeMyTrip, India’s largest online travel agent (OTA), is dealing with more than one problem right now.

Much has changed in the two years since MakeMyTrip acquired its biggest rival Goibibo in one of the largest M&A deals in the Indian online travel space. Now Ctrip, China's number one online travel agent (OTA), owns almost half of MakeMyTrip's shares.

With the rise of ‘super apps’ such as Paytm, PhonePe, and Amazon that target online flights and hotels, and a new breed of Asian VC-funded travel startups like HappyEasyGo entering India, the market is ruthless.

To stay on top, MakeMyTrip is exploring synergies with Ctrip, its largest shareholder, in outbound travel, while betting big on corporate travel, where it is challenging the likes of Thomas Cook and Cox & Kings.

In an exclusive interview with The Passage, co-founder & CEO Rajesh Magow explains how MakeMyTrip is riding the tide. He also speaks, for the first time, Ctrip's role in its future, Goibibo founder Ashish Kashyap’s departure, Naspers’ exit and Oyo becoming an ally again.

Edited excerpts:

The Passage: How does Ctrip's 49% stake in MakeMyTrip change things for the company?

Rajesh Magow: Ctrip had been monitoring MakeMyTrip’s story even before they invested in us. In fact, around the time of the IPO, they were keen to come on board. So it has been a long-standing relationship. The team has not changed either. Jane Sun, the CEO right now, used to be the CFO in 2010. James Liang, the current chairman, had then taken a break to do research studies in the States.

Ctrip ended up investing in us in 2016, and ever since they have been on our board. From that perspective, they have been insiders. Obviously, their shareholding percentage was less but they always had the option to increase their stake.

This potential transaction would be completed with regulatory approval. Operationally, there is not going to be any change. This transaction is essentially a secondary transaction between Naspers and Ctrip. So Ctrip was on our board, and they continue to be. Back then they had invested in the management and the founding team, and they continue to follow the same thesis even now.

From our point of view, it is business as usual. Given that their shareholding would be large now, there could be massive potential synergies in a few areas. Ctrip has done a lot of work in enhancing their vision to go beyond China — they acquired Skyscanner in the past, invested in Travelfusion and others. Behind the scenes, they are working on fixing technology and the supply side.

They have invested a lot to build the international supply for all foreign destinations, both in hotels and flights, and MakeMyTrip can benefit from the work that they have done, especially in the last four years.

Potential synergies can be in the outbound category, where we are looking to grow. There is a lot of headroom. With the Indian middle and upper middle class aspiring to go overseas, outbound travel is growing phenomenally at 50% plus rate year on year for us.

Earlier, we had started our journey to build our own supply of hotels and alternative accommodations for some of the key destinations where Indians travel. We had a list of about 20 destinations where we were building our own supply. But there is much more supply that Ctrip has already built, we could perhaps ride on that and integrate with them.

So we do not really need to invest in building our own supply in other destinations. On the flight side, they have done a lot of work given their association with Skyscanner, they have multiple source inventory for international travel.

Besides this, the strategic advice at the board-level continues. They (Ctrip) would also take supply feed from us for hotels and flights. For their inbound traffic coming into India, they would also integrate with us.

The Passage: Can you enter the China market directly or can Ctrip enter India directly?

Rajesh Magow: No, not really. We will not enter China directly. Since Ctrip is a significant shareholder of MakeMyTrip, it does not make sense to go there directly, and neither does it make sense for them to come to India on their own. It is also carved out in the deal. But we would always be open to all other markets in the future.

The Passage: Ctrip is going global and so is What do you think of the competitive landscape in India and around the world?

Rajesh Magow: and Expedia have been around for many years now in India. We have the market leadership, which we have not only sustained over the years but also improved. We will be able to execute our strategies to deal with any competition.

But at some level, the competition will come from, Expedia, the international OTAs and local OTAs — whether it is Yatra or Cleartrip. They have lost shares over the years and we do think that they would perhaps continue to keep losing shares given their own set of problems.

Cleartrip is largely focusing on the Middle East market. Yatra is going through its own set of challenges. The other competition could also come from some of these horizontal super apps, Paytm or PhonePe which are trying to do some travel use cases for the last couple years, especially transport related.

We keep participating with PhonePe and we also power Flipkart. But if you talk about just a travel super app, which is what we are and our vision is, we are focused on making sure that we continue to improve the consumer experience, keep innovating consistently, and provide the Indian travellers with every single travel need so that we continue to stay ahead of the competition all the time.

The Passage: HappyEasyGo recently entered the India market, and many more such rivals will come. How do you see the competition changing the industry?

Rajesh Magow: Over the years, there have been plenty of such players. If I go back in history, I could list quite a few players who have come and gone. We always watch the competition closely but never get paranoid about them. You have to have your own strategy and your own focus areas and keep executing.

Yes, HappyEasyGo has come in, but it is perhaps easier for anyone to come in. Our market share on domestic flights is more than 25%. A year earlier Yatra and Cleartrip were a distant number 2 and 3. Then Paytm started giving cashbacks and took some share away. From the last two years, others such as, HappyEasyGo and Goomo, have also started making some noise.

On the face of it, it’s easy to sell domestic flights. The real challenge comes in when you get into complex products like international air, hotel and accommodations, and also when you try to become a one-stop shop like us.

The Passage: Do you see Oyo as competition since it also has a direct selling app?

Rajesh Magow: For that matter, every chain will have a direct app or site. If you look at it globally, India is no different. If you look at the middle segment hotels like Lemon Tree and Sarovar, and five-star hotel chains, both Indian and global, they all have their direct sales channel.

However, the budget category is different. Not everyone has the resources to go out and acquire customers directly. It takes a lot. Oyo has tried to aggregate that inventory and build a supply-direct strategy on top of it. To that extent, it would be a competition. The good news is that because of our partnership we are also selling them. We have commercial arrangements where the content strategy is maintained between the two sides, which is very important, and therefore, it doesn't hurt beyond a point.

But in terms of overall competition you would always have a share of hotel bookings that are done directly from the hotels' websites or apps. And then a large portion of hotels will be filled by OTAs like us, and then there will be some offline travel agents. So there is still a lot of headroom for us. Our overall focus, largely, is on budget segment.

The Passage: You were not selling Oyo till early last year. Why did you decide to resume it?

Rajesh Magow: We were not selling Oyo initially, and the single important reason was that when Oyo started, it was not positioning itself as a complete hospitality chain. They were doing partial inventory like us. Then they began taking hotels with 100% inventory and not just a few rooms. Now they are completely operating on a hospitality business model rather than a hotel aggregator model.

There are nuanced differences between the two, but quite an important one — inventory risk is the most important one. That is when we did not see any conflict of interest, so we started selling them.

The Passage: Why are Treebo and FabHotels not on your platform anymore?

Rajesh Magow: It is a commercial thing. Right now, the size that they have (is not as big), and some of those independent properties which they have, when the churn* happens, in any case, it comes to us when we sell them. And the deal is not carved in stone. If the commercials work out, then we can always have them.

The Passage: So is there no exclusivity agreement with Oyo?

Rajesh Magow: To be honest, I don't think we need to read too much into it. I would leave it by saying that from time to time, you end up doing some commercial agreements which are very competition sensitive. So we cannot go public with those terms. It is a commercial decision, whether it is exclusive or non-inclusive doesn't really matter.

In the past, Treebo too had decided not to work with us. Do not assume that it could be one-sided.

The Passage: How did things change for MakeMyTrip after the acquisition of Goibibo? How do you differentiate between the two brands? As a customer, I see that both are doing the same thing.

Rajesh Magow: Interesting that you say this. But between the two brands, the customer overlap is just about 25%. So 75% of the customers who transact on MakeMyTrip or Goibibo are unique, which is good for us.

Obviously, we are watching this data point very carefully. If you go in more detail, you will see we have tried to position them differently. For example, Goibibo is focusing a lot more on budget and mid-segment, whereas MakeMyTrip is mid and premium segment, and loyalty programmes are different. There are nuanced differences in the user interface as well. There are many differences at least by design that we do behind the scenes.

In today's era, consumers like to compare prices. And given that India is a mobile app market, if you have number 1 and 2 app on small real estate, it doesn't hurt.

The Passage: Ashish Kashyap (of ibibo Group) left a year after the acquisition. What happened there? We see founders leave the company within a year or so after getting acquired.

Rajesh Magow: What do you think happened? (Laughs) Please go and ask Ashish, but I can tell you this, nothing unusual happened.

One of the reasons, normally, founders leave is that sometimes they feel they have finished one part of the goal in their mind and they would want to do something different. So it is quite natural. In many cases, you would see that they would want to do things differently. But there was nothing unusual or untoward that happened. It was very smooth and totally his own decision. The rest of the team is intact. In fact, all of the leadership team of Goibibo is still us.

The Passage: Was Naspers looking for an exit when they sold their share to Ctrip?

Rajesh Magow: It's a question for Naspers. From our point of view, both Naspers and Ctrip were equally good. Naspers came by virtue of the transaction with Goibibo. They provide a very good global platform. By virtue of this transaction, they got on to the Ctrip cap table. At our level, nothing much has changed because they stay invested in travel by virtue of being now on Ctrip.

The Passage: The company has been posting operating losses. During your previous earnings call, you said you would be breaking even soon. How close are you?

Rajesh Magow: The strategic directions, the trajectory, the way we have been reporting our performance for the last few quarters, it is likely to continue. That's the only thing that I could say because I don't want to jump to specifics of when we would likely be breaking even. The market is pretty dynamic.

The Passage: How do you see Chinese investors as compared to US investors?

Rajesh Magow: I haven't deeply analysed both of them, but in our limited experience with Chinese investors—essentially Ctrip—we see there are more similarities between the Indian and China markets, and you would see them fairly close to the ground reality. The US investors sometimes may take some time to completely understand the Indian market.

The Passage: What are the top learnings you have got from Ctrip?

Rajesh Magow: It's difficult to point out one thing. India and China both are mobile app markets.

One could always compare notes on how consumers behave on an app ecosystem in China and India, which is what we have been doing. The learning is not necessarily one-sided. Sometimes, they end up learning something from us as well. Specifically in travel, there is a lot of group travel that happens out of China and India. So you can look at some consumer insights and learn from each other.

Last, but not the least, it is also the competitive dynamics. Ctrip went through a huge amount of competition, whether it is Qunar or Elong, and used sales promotions as one of the disruptive ways of growing into the market in terms of customer acquisition. The Western markets never did it. Again, this is another area you can learn from, and not necessarily copy-paste in India.

The Passage: Do you plan to partner with OTTs?

Rajesh Magow: No. We are working on building our own content at least for now, but it’s a work in progress.

The Passage: You entered local activities space some time back. Is entertainment a potential market for you?

Rajesh Magow: Local activities segment is very close to travel experience and complementary, if you look at the weekend and local traffic.

The idea was to basically look at high-frequency use cases. Overall, not necessarily digress completely from super travel app vision. Currently, that's the focus. We have launched activities, events and food-related deals, etc. This would drive traffic because of high-frequency use-case. Nothing is ever ruled out in the internet business. But our vision, right now, is to stay focused on overall travel and travel-related stuff.

The Passage: Very few Indian startups get listed in India. Why? And what can others learn from MakeMyTrip?

Rajesh Magow: I don't know whether they need to list anymore because there is plenty of new capital that is available. There are only two reasons to go public. One, you are looking for an exit. Two, you are looking for more capital. So one of them is getting filled nicely in private equity.

Exit is the function of market prices and maturity of the business cycle. Now the options for it can also be two — one, you can just go public and provide an exit to your investors or you go for sellouts.

I would not like to generalise by saying there are very few companies which have opted to list in India. I think every business is different, the stages of life-cycles are different, and they have different goals.

The Passage: What are the growth areas for MakeMyTrip?

Rajesh Magow: Outbound is one category we are focussing heavily on, and we will grow really at a fast pace. Then there is corporate — we started focusing more on acquiring market share and the corporate business about a year and a half ago. We recently announced majority stake ownership in Quest2Travel as well.

So we would look to grow corporate market share. Bus, activities and events, which is a new category will continue to grow. Domestic hotels and accommodation segment is still underpenetrated, it will also continue to grow. That leaves us with domestic flights, where we will continue to incrementally grow our market share.

The Passage: Do you plan to enter global markets?

Rajesh Magow: At some stage, perhaps, we would go overseas, but right now, we think India has a lot to offer in the next two to three years.

The Passage: Oyo went international with its hotel chain strategy. How do you look at that? They are doing something different than other players.

Rajesh Magow: Again, better ask Oyo. But I am sure, at some level, it is driven from the investors' ambitions as well. From their own hotel inventory acquisition model they have decided to go global, and I think there is room.

The Passage: What are the challenges in the market right now?

Rajesh Magow: The headwinds are in the domestic aviation market right now. Thanks to Jet Airways, there are supply constraints. But I believe, as compared to what happened with Kingfisher a few years ago, the industry is better poised right now. I think, in the next three to four quarters, the industry should come back as SpiceJet, Indigo, and the others would take slots and play. But I do see that growth is under pressure for this fiscal year. In the next fiscal, the growth will probably come back.

*Churn rate: Rate of attrition; percentage of service subscribers who discontinue their subscriptions within a given time period.

Moulishree Srivastava

Moulishree Srivastava is a Bangalore-based tech journalist. She focuses on emerging Indian startups and unicorns. She can be reached at

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